Overview of Competition Law

Overview of Competition Law

Module 1 Overview of Competition Law The Australian Competition and Consumer Commissions Tertiary Online Education Program Module 1 Overview Learning Objectives Explain the concept of competition and why it is important List the 5 core prohibitions under Australian competition law Outline the major penalties for failing to comply with the Competition & Consumer Act Explain the role of the Australian Competition & Consumer Commission (ACCC) Outline Introduction

What is competition? How competition promotes efficiency The 5 core competition prohibitions in the Competition & Consumer Act Penalties and remedies if the law is broken Enforcing and investigating breaches of the law: the role of the ACCC Summary 2/12/20 Conference 3 Introduction There are formal laws which govern how businesses trade in the marketplace

Designed to ensure an open, competitive environment Which should lead to a more efficient marketplace, and so benefit consumers (the public), business and society The Competition & Consumer Act (2010), previously known as the Trade Practices Act (1974) Applies to all individuals or organisations operating in trade or commerce anywhere in Australia Similar laws exist in most other countries 2/12/20 Conference 4 What Is Competition? Rivalry between different businesses Many commonsense definitions, but no one formal legal

definition Usually refers to a situation where one business (or more) has rivals who limit its ability to set prices It is more important to understand what is anti-competitive conduct and therefore illegal Australias competition laws regulate the way businesses deal with their customers, suppliers and competitors. These laws apply across Australia and are found in the Competition and Consumer Act 2010 (the CCA) Any commercial actions which occur in trade or commerce (almost any typical business activity) are likely to be covered by the CCA 2/12/20 Conference 5

Promoting Efficiency Competition laws are designed to create more efficient marketplaces Efficient marketplace: one that creates the greatest outputs with minimum inputs (resources) Three types of efficiency: Allocative - Allocating production resources efficiently to different goods and services Productive - Reducing wasteful processes Dynamic - Investing in new technology 2/12/20 Conference 6 Five Core Prohibitions

Part IV of the Competition & Consumer Act forbids: 1. Misuse of market power 2. Cartels 3. Exclusive dealing 4. Resale price maintenance 5. Anti-competitive mergers 2/12/20 Conference 7 Core Prohibition 1: Misuse of Market Power Businesses with substantial market power may not misuse their market power It may not take advantage of its market power for an anticompetitive purpose, such as: Eliminating or substantially damaging another business

Preventing a new business seeking to startup Preventing another business form competing Discussed in more detail in module 3 2/12/20 Conference 8 Core Prohibition 2: Cartels Cartel: an agreement between firms not to compete against each other Can take many forms, including: Fixing prices Restricting production or supply of goods Agreeing to allocate (share) customers or markets between

each other Boycotting certain suppliers or customers Rigging bids or tenders Discussed in more detail in Module 2 2/12/20 Conference 9 Core Prohibition 3: Exclusive Dealing Restricting the ability of other businesses to freely buy their goods or services For example, only agreeing to supply goods to a business on the condition that they will not also buy from your competitor - is only prohibited if it has an anticompetitive effect

May also include third line forcing where a supplier requires that a consumer acquires goods or services from another unrelated business is prohibited irrespective of its effect on competition Discussed in more detail in Module 5 2/12/20 Conference 10 Core Prohibition 4: Resale Price Maintenance Requiring firms not to sell goods/services below a certain minimum price For example, a supplier who induces customers not to sell goods for less than a specified minimum price makes an agreement with customers that requires them to charge no less than a specified minimum price withholds supply from customers that sell goods below the specified

minimum price uses a statement of price likely to be understood as specifying minimum sale prices The ACCC may authorise conduct that would otherwise breach the resale price maintenance prohibition where the conduct meets the public benefit test Restricts price competition between firms Discussed in more detail in Module 4 2/12/20 Conference 11 Core Prohibition 5: Anti-Competitive Mergers A business cannot acquire or merge with another firm if it leads, or is likely to lead, to a substantial lessening of

competition in a particular market Merging firms may be required to divest (split up) or sell some assets if a substantial lessening of competition is likely to occur 2/12/20 Conference 12 Penalties and Remedies Wide range of penalties exist for breaches of the Competition & Consumer Act, including: civil pecuniary penalties (financial penalty) criminal penalty (fines and jail time) damages (compensation order) injunction (court order to do or stop doing something)

disqualification order (ban someone from being a company director) other orders (company or staff must establish in-house education program, publish corrective advertisement, etc.) These penalties are imposed by a court. The ACCC cannot just impose penalties by itself it must prove its case in court against a business/individual Different standards of proof apply for civil penalties i.e. on balance of probabilities compared to criminal penalties i.e. beyond reasonable doubt (criminal is higher standard than civil) 2/12/20 Conference 13 Role of the ACCC The ACCC promotes compliance with Australias competition laws through

education programs and by issuing guidelines that help businesses understand the law ACCC may also examine possible breaches of the competition law raised by stakeholders or through its own investigations Businesses who break the law but voluntarily co-operate with the ACCC may receive leniency or immunity from prosecution The ACCC can collect information by: asking firms to voluntarily give information compel them to provide info (using a section 155 notice) obtain a search warrant from a court phone tapping (for cartels)

May also grant some firms exemption from the competition law (authorisation or notification such as exclusive dealing) ACCC can enforce the law by: Administrative resolution (informal) Court enforceable undertaking Litigation (court action) 2/12/20 Conference 14 Summary One major piece of law: the Competition & Consumer Act Competition-related provisions of the Act are designed to promote efficiency, which can take different forms It has five key prohibitions Wide range of penalties may apply if the law is broken

The ACCC exists to educate Australians about the law, investigate possible breaches of it, and prosecute cases in court 2/12/20 Conference 15

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